Opinion
Case No. 01-16034 [AJG], Jointly Administered
August 6, 2003
David Fleischer (DF-9230), Stephen Z. Starr (SS-3793), PAUL, HASTINGS, JANOFSKY WALKER LLP, New York, New York, GENERAL ELECTRIC CAPITAL CORPORATION, By its attorneys.
John P. Dillman (JD-1589), Tara L. Grundemeier (TG-5077), LINEBARGER GOGGAN BLAIR SAMPSON, LLP, Houston, Texas, HARRIS COUNTY, CITY OF HOUSTON, HOUSTON INDEPENDENT SCHOOL DISTRICT, HOUSTON DOWNTOWN MANAGEMENT DISTRICT, By its Attorneys.
STIPULATION AND ORDER BETWEEN GENERAL ELECTRIC CAPITAL CORPORATION AND CERTAIN TEXAS TAXING AUTHORITIES
This stipulation (the "Stipulation") is entered into as of August 6, 2003 by and between General Electric Capital Corporation ("GE Capital") and Harris County, City of Houston, Houston Independent School District and Houston Downtown Management District (the "Texas Taxing Authorities") with reference to the following recitals:
RECITALS
WHEREAS, on December 2, 2001, Enron Corp. ("Enron") filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") with the Bankruptcy Court for the Southern District of New York ("Bankruptcy Court"); and
WHEREAS, on or about June 27, 2003, Enron and its affiliated debtors (the "Debtors") filed Debtors' Motion For Entry of an Order, Pursuant to 11 U.S.C. § 363(b), (e) and (f), or 554(a): (I) Authorizing Sale of Certain Property Free and Clear of Liens of General Electric Capital Corporation; or (II) In the Alternative, (A) Approving Debtors' Abandonment of Property, and (B) Directing GE Capital to Immediately Take Possession of Abandoned Property; (III) Reducing Monthly Adequate Protection Payments to GE Capital; and (IV) Granting Related Relief (the "Third Sale Motion"); and
WHEREAS, on July 3, 2003, GE Capital filed its Motion for Relief from the Automatic Stay (the "Second Relief From Stay Motion"); and
WHEREAS, on or about July 14, 2003, the Texas Taxing Authorities filed their Limited Objection to the Third Sale Motion; and
WHEREAS, on or about July 14, 2003, the Texas Taxing Authorities filed their Limited Objection to the Second Relief from Stay Motion; and
WHEREAS, GE Capital alleges that it holds a valid and perfected lien against the Surplus Collateral (as such term is defined in the Third Sale Motion) pursuant to a financing arrangement with Enron described in detail in the Second Relief from Stay Motion; and
WHEREAS, the Texas Taxing Authorities allege that they hold a valid statutory lien for ad valorum taxes against the Surplus Collateral as described in detail in the Limited Objections filed by the Texas Taxing Authorities to the Third Sale Motion and Second Relief from Stay Motion, provided, however, that based on further information provided to the Texas Taxing Authorities by Enron, the total amount of pre-petition claims of the Texas Taxing Authorities potentially related to the Surplus Collateral, stated as $2,410,909.11 in their Limited Objections is in excess $1.7 million and the correct amount of the post-petition claims stated as $442,805.01 in the Limited Objections is $0.00; and
The Texas Taxing Authorities also allege that they hold liens against the Schedule 1 Collateral (as such term is defined in the Third Sale Motion) other than the Surplus Collateral and that they hold liens against other personal property of Enron not constituting part of the Schedule 1 Collateral or the Surplus Collateral.
WHEREAS, the Bankruptcy Court has jurisdiction with respect to this Stipulation pursuant to 28 U.S.C. § 157(b)(2)(A), (K) and (O); and
WHEREAS, following discussions among representatives of GE Capital and the Texas Taxing Authorities, GE Capital and the Texas Taxing Authorities have agreed, inter alia, upon a mechanism to resolve their competing claims to the Surplus Collateral and other related matters.
NOW, THEREFORE, IT IS HEREBY STIPULATED, CONSENTED TO AND AGREED by and between the parties hereto that:
1. The Texas Taxing Authorities consent to the adjournment of the hearing with respect to the Second Relief from Stay Motion from July 24, 2003 at 10:00 a.m. to a date that is approximately sixty (60) days thereafter.
2. The Texas Taxing Authorities consent to the abandonment by Enron of the Surplus Collateral to GE Capital subject to the terms and conditions of this Stipulation.
3. After taking possession of the Surplus Collateral GE Capital will promptly notify the Texas Taxing Authorities of the location(s) at which it is maintained or to which it is transported by GE Capital.
4. For an initial period of sixty (60) days (the "Standstill Period") following the date the parties enter into this Stipulation, the Texas Taxing Authorities shall not take any action to disturb the status quo with respect to the Surplus Collateral, including, but not limited to, levy of execution, marshal's seizure or attachment, or commencement of an action or other proceeding with respect to the Surplus Collateral or GE Capital that would alter the status quo, unless otherwise agreed to in writing in advance by the parties hereto.
5. During the Standstill Period, except as otherwise expressly provided in this Stipulation, the respective rights, liens, claims, and causes of action of the Texas Taxing Authorities and GE Capital with respect to each other and with respect to the Surplus Collateral shall be deemed and hereby are expressly preserved.
6. Based upon the value of the Surplus Collateral relative to the value of all of the Schedule 1 Collateral as determined through discovery relative to the Second Relief from Stay Motion and/or the Third Sale Motion, and/or by expert witnesses, the Texas Taxing Authorities and GE Capital shall in good faith attempt to jointly agree to a pro rata apportionment of the liens of the Texas Taxing Authorities with respect to the Surplus Collateral, provided, however, that in consideration of GE Capital's role in arranging the transportation, storage, insurance and/or sale of the Surplus Collateral, at least fifty percent (50%) of the proceeds of a sale of the Surplus Collateral (or at least fifty percent (50%) of the value of the Surplus Collateral in the event of a transfer of a portion of the Surplus Collateral to GE Capital in accordance with Article 9 of the Uniform Commercial Code in lieu of a sale) shall be used to satisfy the liens of GE Capital and not the liens of the Texas Taxing Authorities (the "Carve Out"). No waiver of the Texas Taxing Authorities' claims and liens against the Debtors, the Schedule 1 Collateral other than the Surplus Collateral, and other property of the Debtors not constituting the Schedule 1 Collateral is intended nor shall be implied as a result of the Carve Out. The apportionment shall take into account, inter alia, that the Texas Taxing Authorities also have liens against other personal property of the Debtors not constituting the Schedule 1 Collateral.
7. Based upon the amount of the liens of the Texas Taxing Authorities with respect to the Surplus Collateral as jointly determined by the Texas Taxing Authorities and GE Capital in accordance with the preceding paragraph, that portion of the Surplus Collateral determined jointly by the parties to be subject to the liens of the Texas Taxing Authorities shall be upon sale to a third party or GE Capital, or transfer to GE Capital in accordance with Article 9 of the Uniform Commercial Code in lieu of a sale, surcharged for the Texas Taxing Authorities' proportional share of the costs and expenses of transportation, storage, insurance, maintenance and sale of the Surplus Collateral and any other costs and expenses related thereto (collectively, "Costs"), incurred on and after the effective date of abandonment thereof by Enron. Such surcharge shall be, subject to the Carve Out and after application thereof, effectuated by means of either (i) an offset against the Texas Taxing Authorities' portion of the proceeds of the sale of the Surplus Collateral, or (ii) an offset against any payments made by GE Capital to the Texas Taxing Authorities in satisfaction of the liens of the Texas Taxing Authorities against the Surplus Collateral.
8. GE Capital shall be subrogated to the liens and claims of the Texas Taxing Authorities against the Debtors pursuant to section 509 of the Bankruptcy Code and common law principles of subrogation for (i) any payments that GE Capital makes to the Texas Taxing Authorities with respect to the liens of the Texas Taxing Authorities against the Surplus Collateral as jointly determined by the parties in accordance with paragraph 6 herein, and/or (ii) any payments that GE Capital makes on account of the Texas Taxing Authorities' portion of Costs in accordance with the preceding paragraph.
9. The Bankruptcy Court shall retain jurisdiction to enforce the provisions of this Stipulation, any rights arising hereunder, and to reconcile any disagreement or inconsistency regarding the terms of this Stipulation.
10. The signatories to this Stipulation represent that they are authorized to enter into this Stipulation.
11. This Stipulation may be executed in counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same agreement. This Stipulation may be executed by facsimile signature which shall have the same force and effect as an original signature.
SO ORDERED.